Thoughts From Your Valuation Source

The Fed is adopting a plan in order to protect home buyers from what they consider "shady lending practices". According to an article on ABC7 the changes would be as follows:

Chairman Ben Bernanke and his central bank colleagues approved a plan Monday that would crack down on dubious lending practices that have hurt many of the riskiest "subprime" borrowers - people with tarnished credit histories or low incomes.

In that regard, the plan would:
- bar lenders from making loans without proof of a borrower's income.
- require lenders to make sure risky borrowers set aside money to pay for taxes and insurance.
- restrict lenders from penalizing risky borrowers who pay loans off early. Such "prepayment" penalties are banned if the payment can change during the initial four years of the mortgage. In other cases, a penalty can't be imposed in the first two years of the mortgage.
- prohibit lenders from making a loan without considering a borrower's ability to repay a home loan from sources other than the home's value. The borrower need not have to prove that the lender engaged in a "pattern or practice" for this to be deemed a violation. That marks a change - sought by consumer advocates - from the Fed's initial proposal and should make it easier for borrowers to lodge a complaint.

"Rates of mortgage delinquencies and foreclosures have been increasing rapidly lately, imposing large costs on borrowers, their communities and the national economy," Bernanke said.

Although some lenders did employ rather shady practices the focus seems to be solely on lenders when it comes to reform. Not everyone thinks that the blaming of lenders is the way to go and others are calling for even more strict measures.

For all mortgages, the plan would require advertising to contain additional information about rates, monthly payments and other loan features, and it would curtail certain deceptive or misleading advertising practices.

Other practices also would be clamped down on. Lenders, for instance, have to credit a mortgage payment to the homeowner's account on the day it is received. And, brokers and others are forbidden from "coercing or encouraging" an appraiser to misrepresent the value of a home.

Consumer groups initially complained that the new rules are not strong enough. Lenders worry they are too tough, could limit mortgage options for people and made it harder for some to obtain financing.

The new lending rules may not get a test for some time because there are fewer home buyers these days, given all the problems in the housing and credit markets. Also, some of the shady practices - along with some lenders - have not survived, felled by the mortgage meltdown.

"Clearly this is closing the barn door after the fact," said Susan Wachter, a professor of real estate and finance at the University of Pennsylvania's Wharton School of Business. Yet, she said, "this is a very important move. It absolutely will make a difference going forward."

Much will hinge on effective enforcement.

A recent article in Market Watch said that Credit Unions are not experiencing the fallout from recent mortgage woes and are the safer place to be banking. The article praised the way they do business and said that their practices are helping them be the future of banking.

As much as that thought is comforting, a new reality is emerging. What is not being taken into account is the other types of loans as well. Not all loans being defaulted, and adversely affecting the credit of the borrower, are mortgage loans. This is made evident by an Arizona Credit Union, mentioned in an article yesterday.

In a sign financial problems are spreading to credit unions, Arizona Federal last week reported a sizable first-half loss stemming from delinquent auto, credit-card and home-equity loans.

Ron Westad, the credit union's president and chief executive officer, said the poor numbers reflect financial pressures faced by members, many of whom work for city governments around the state.

"Our members are having trouble carrying their obligations and meeting their commitments," he said. "Our members are in harm's way."

Arizona Federal had tried to delay reporting some of the delinquencies in hopes of helping members avoid demerits on their credit reports, "but we just couldn't do it any longer," Westad said.

Delinquent accounts, they're not just for mortgages anymore.

It seems like everywhere you look these days there is a new panic in the financial sector. From mortgage companies to coffee giants, it seems to be everywhere. Some are predicting another depression but not everyone is so worried, according to an article in the LA Times.

"We've gotten to that classic point in a financial crisis where it's gone on for long enough we know there are losses. We just don't know where they are," said Joseph R. Mason, a financial economist at Louisiana State University in Baton Rouge.

"The only way to find out is for investors to push every institution toward failure and see which ones keep operating," Mason said.

About the sunniest assessment that analysts will offer is that if the current crisis holds to historical patterns, it could end as unexpectedly as it began.

"Most panics are like summer storms," said David A. Moss, an economic historian at Harvard University. "They come up abruptly, are erratically intense, then suddenly dissipate."

Bears Stearns seemed to lead the pack and now even the expected "saviors" Fannie Mae and Freddie Mac are showing signs of trouble. In the midst of all this is some good news, especially for our SUV drivers.

Last week held true to the storm pattern Moss described. After another round of potentially catastrophic developments in the housing, financial and energy markets, the system pulled to the brink, caught its breath and took a turn for the better.

Oil prices not only halted their upward rush, they fell back a remarkable $16 a barrel in the space of a few days. And after a frenzy of concern about the banking system, markets suddenly calmed when three major institutions -- Citigroup Inc., Wells Fargo & Co. and JPMorgan Chase & Co. -- reported better-than-expected results.

No one is claiming that the storm is over or that this is the sign that nothing else will go wrong. No, instead they are simply referring to it as a sign that, no matter what the doomsday proclaimers are saying, there will be an end to this.

In an article from the Daily News City Hall promised to take on some of the crunch from budget budget shortfall in the $400 million range. There were to be cutbacks and layoffs. Los Angelos Mayor Antonio Villaraigosa also said there'd be higher charges for everything from parking tickets to fees at public golf courses.

This summer, it's become clear that the pain will be unequally distributed. After enthusiastically hiking all those promised fees, city officials reneged on the promise of frugality.

To convince the public that this time the city means business - after 25 years of not laying off a single employee - the mayor even came up with a specific number of employees, 767, to trim from a citywide work force of nearly 50,000. That was how many city jobs would be cut - about half of them purportedly filled by actual workers drawing a salary.

But that number has turned out to be as fictional as the "hiring freezes" City Hall undertakes from time to time to feign frugality. The Daily News has learned that, in the end, only four workers out of 50,000 may lose their jobs - and even the four likely will be safe, as city officials are still trying to find them other city jobs.

In fact, many of these "laid off" workers are finding themselves with better paying jobs.

About 78 workers found jobs in the city's three proprietary departments (Water and Power, World Airports and Port of Los Angeles), which typically pay even better.

What is so offensive about this is that local companies are laying off many in the area and while those people are struggling for jobs others are getting better ones in an attempt to mask that City Hall is not doing what it promised and is still charging more for everything they provide.